Franchisee Real Estate Lease: DOUBLE NET LEASE

A double net lease is a commercial real estate lease where the franchisee (tenant) is responsible for paying base rent plus two of the major property operating expenses, which is almost always the property taxes and the property insurance.

Contact Neufeld Legal PC for franchising legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

The complexity of the lease agreement for the commercial real estate that is used in the franchise operation can very easily equal, or even surpass, that of the franchise disclosure document and the franchise agreement, such that retaining the legal services of an experienced lawyer to decipher, explain and negotiate the commercial lease agreement and its schedules. And for over 25 years, we have been working with business owners, including franchisees, to understand and deal with commercial lease agreements that have been presented by landlords and are foundational to their business operations. To gain the most from our legal analysis and advice as to the commercial leasing arrangement, a franchisee would be well served to understand some of the most significant commercial leasing terminology, which we have undertaken to provide you with in-depth analysis.

A double net lease is a commercial real estate lease where the franchisee (tenant) is responsible for paying base rent plus two of the major property operating expenses, which is almost always the property taxes and the property insurance. In this arrangement, the landlord is still responsible for the other major operating expense, being maintenance costs and structural repairs.

With respect to property taxes, the franchisee (tenant) pays their proportionate share of the property's real estate taxes (in a multi-tenant building, this is often calculated based on the square footage they occupy). As for property insurance, the franchisee (tenant) pays for the insurance premiums that cover the building structure and associated property against risks like fire, natural disasters, or other damage..

The distinguishing features and characteristics associated with a Double Net Lease:

• Tenant Responsibility: The tenant pays base rent, property taxes and insurance.

• Landlord Responsibility: The landlord pays for maintenance, and structural repairs.

• Less Common: Double net leases are less common than triple net leases because they offer less of a hands-off approach for the landlord.

• Lower Base Rent: Since the tenant is taking on the expense of property taxes and insurance, the base rent is typically lower than it would be in a gross lease.

Naturally, how the concept operates in the specific context of the particular lease agreement requires experienced legal analysis, such that you make the most out of your understanding of the commercial lease agreement for your franchise. For such legal analysis and advice for your franchise and its commercial leasing arrangements, we welcome you to contact franchisee lawyer Christopher Neufeld at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com to schedule a confidential consultation.

Franchisee Real Estate Leasing Basics - Many franchise arrangements require that business operations are undertaken from commercially leased real estate, where it is next to impossible to purchase acceptable real estate at which the franchised business is to be undertaken. As such, it is imperative that your commercial leasing arrangements are correctly undertaken and don't financially hurt your business' profitability, with an understanding of the basics of commercial leasing of real estate being important. Read more.

 

Franchisee Real Estate Lease: Build and Build-out - Although there are a multiplicity of factors at play when a franchisee is looking to commence their particular franchise operation, two of the more consequential aspects that the franchisee (lessor) needs to be aware of are the build (construction of the building) and the build-out (internal work on the leased premises). Read more.

 

Franchisor as Tenant (with Franchisee subleasing) - Whereas the typical leasing arrangement is for the franchisee to lease the subject property from the property owner (landlord); on occasion, the franchisor will lease the property from the property owner and thereafter proceed to sublease that same property to the franchisee. As opposed to the franchisee leasing directly from the property owner, having the franchisor enter into the lease with the property owner can be advantageous to the franchisee. Read more.

 

Contact us via email at chris@neufeldlegal.com or call 403-400-4092 / 905-616-8864.